Japan’s inflation rate has risen to a new 41-year high as businesses pass on increasing expenses to their customers. In the past month, core consumer prices increased by 4% from a year ago, which is twice the Bank of Japan’s (BOJ) desired goal. It increases the pressure on the central bank to increase interest rates in an effort to reduce the rising expense of living. Despite rising prices for everything from food to gasoline, the BOJ increased the ceiling on the interest rate on its 10-year government bonds from 0.25% to 0.5%. As a result, the value of the Japanese yen has risen sharply in comparison to the US dollar, reaching 151 yen to the dollar for the first time since 1990. Producer prices have long been rising far more quickly than consumer prices, but now businesses are passing these costs on to customers, according to Damian Thong, head of Japan equity research at Macquarie Group.

Consumer prices represent what households actually pay for goods and services, whereas producer prices are a measure of inflation at the wholesale level. According to official data issued on Friday, January 20, inflation reached its highest level since 1981, exceeding the central bank’s 2% objective for the ninth consecutive month. Even after the price spike, Japan continues to enjoy one of the lowest inflation rates in the world. The country has defied the trend of the other G7 nations, which have steadily raised interest rates to rein in skyrocketing prices. In an effort to slow the rate of price increases, many experts anticipated that the central bank would begin to phase off its economic stimulus program.